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Global Energy Advisory - 12th December 2014

Somalia has invited Soma Oil and Gas, ExxonMobil, Royal Dutch Shell, BP and Chevron to explore oil and gas resources in the country. Soma Oil and Gas—based in the UK and backed by Russian billionaire Alexander Djaparidze--has completed an onshore and offshore seismic survey in the Somali capital, Mogadishu. The government in Mogadishu said it would reward the company for carrying out the seismic survey with licenses to explore for oil.

This is a daunting endeavor in a country where security remains shaky at best and where al-Shabaab is clearly resurging. Attacks by the Islamist militant group have picked up momentum recently, not only in the capital but also in Baidoa (south-central), near the border with Kenya, and in Kenya itself.

There should also be grave concerns about the development of oil and gas here as Somalia and Kenya dispute offshore territory and there is no chance of talks progressing on this as long as al-Shabaab continues with its militant revival.

Oil & Gas Markets

State-run Kuwait Petroleum Corp. says it will sell crude to Asian refiners at $3.95 per barrel, which is well below regional benchmarks and represents the largest discount since 2008. Likewise, Saudi Arabia has increased its discount more than it has in 11 years as crude prices look set to remain at around $65 per barrel for the next six months. This is one seemingly viable scenario, as long as OPEC sticks to its production…